Ever felt like picking the right shares is harder than assembling IKEA furniture without the instructions? Sometimes it feels like outperforming the market is impossible.

Well, you’re not alone. According to Morningstar, between 2013 and 2023, only 44% of active fund managers actually beat the index.

That means 56% of investors whose entire job is to beat the market… lost to the market.

But what if you had a secret weapon that could help you with your investments?

And outperform fund managers…and the market?

Well, it may actually be possible… the name is GPT. ChatGPT.

Yep, that’s right.

A recent analysis by Finder uncovered that a basket of stocks selected by ChatGPT far outperformed some of the most popular investment funds in the United Kingdom.

Between March 6 and April 28 2024, ChatGPT recommended a portfolio of 38 stocks, and during this period, these stocks gained 4.9%. 

On the other hand, 10 leading investment funds clocked an average loss of 0.8%. Ouch.

Now, of course, this article is not financial advice. And ChatGPT is programmed not to give financial advice either. 

But although ChatGPT shouldn’t be used as your financial advisor, there are many ways to use its wealth of knowledge to better understand companies and potentially even outperform the market.

1. Use ChatGPT to gain a high level understanding of a company

When you’re investing directly in a company via the share market, you want to make sure you’re not just throwing blindly at a dartboard… or making decisions on a whim.. or based on your star sign. 

That’s where ChatGPT can come in. It can help you simply understand what the company does and how it actually makes money. 

Of course, you can tirelessly search through company reports, investor presentations and commentary on X (formerly Twitter), but ChatGPT can do all the work for you - a LOT quicker.

This is just the beginning. You could ask ChatGPT about Xero’s revenue, EPS and profitability over the past 5 years too.

2. Use ChatGPT to summarise earnings calls

Earnings calls are one of the main sources of information that investors use to make decisions. 

And while some earnings calls can be interesting, most of them are drier than a raisin in the sun.

 In fact, earnings calls are generally a bunch of buzz-words, distractions from the facts, and optimistic (sometimes lofty) projections for the future. 

Ohh.. and if you wanted to listen to every single earnings call of every single company that piqued your interest - you’d probably be stuck on calls for weeks. 

So using ChatGPT to summarise earnings calls is an efficient way to get all the information with less than 1% of the work. 

On the topic of Xero, we provided ChatGPT with a link to Xero’s FY24 results and asked:

“Here is the investor presentation for Xero. Can you act as an investment analyst please and summarise the financial results, strengths, weaknesses and forecast for the future in 100 words?”

3. Use ChatGPT to understand the risks investing in a company

We know that every investment has a level of risk. 

And even more so when you’re investing directly into companies (as opposed to a diversified index fund). 

If you’re a good investor, you can identify growth opportunities but you also need to identify and mitigate against the risks that each company presents.

If you’re unclear on the risks for a particular investment, this is something you can ask ChatGPT.

“Act as an investment analyst and highlight the risks involved in investing in Xero. Please include their competition, financial performance and product. Max 200 words”

Okay - this sounds too good to be true - are there any risks using ChatGPT?

I’m glad you asked because yes there are. Ever heard of hallucinations?

Nope, we’re not talking those whacky dreams you get during an intense fever - we’re talking about AI hallucinations. 

This is where ChatGPT completely makes up an answer… about 3% of the time. Sometimes hallucinations are obvious, but sometimes they’re not..and you definitely don’t want to make an investment decision off the back of ChatGPT’s hallucination.

So the moral of the story is that any facts or recommendations received from ChatGPT should ALWAYS be fact-checked against a reliable source.

 A good tip is to ask ChatGPT where it sourced its information and verify the source is accurate and reliable. 

So while ChatGPT is far from perfect - it’s a WHOLE lot better than painstakingly scraping through millions of lines of corporate speak. 

It can be a handy sidekick on your investment journey that can make your investing life easier… if you use it properly. 

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